Tom Fanning, our genial CEO host,
said some things I’ve never heard him say before like
Southern Company is
“pivoting towards wind”
and SO’s board soon has to decide whether to go forward with Plant Vogtle
“or not” probably by August.
Fanning gets the
first and
last word in this blog post,
plus a complete transcript of what
I asked and
Tom Fanning’s response,
along with summaries of the other questions and answers.

Please hear me!
I think renewables are exceedingly important in the future.
— Tom Fanning, CEO, Southern Company

Sam Booher, with 3,283 shares, all for the benefit of his wife, asked:

The world’s climate is changing, and it’s not getting better for anyone.
Southern Company has a real opportunity to shape the federal climate policy
that works with our business strategy.
With the progress Southern has made in solar, and in the future wind
energy, we have a voice with the other electrical power producers
that carries significant weight.

I would like to see Southern Company organize the collective voices
of all of our electrical power producers to support the existing Paris agreement
to fight climate change.

In the Paris agreement, companies like ExxonMobil, Dow Company, and other
major corporations have already come out publicly in support of upholding the Paris agreement.
We need to be on that list.

Tom Fanning responded that Southern Company avoided rhetoric in preference
for real solutions.
Unfortunately the “solutions” he named first were “clean coal” and nuclear.
He did get around to mentioning renewables and Southern Company’s
biggest private utility R&D operation, plus longleaf pines for natural
CO2 capture.

By the way, SO hasn’t historically avoided rhetoric; they were caught
last year funding ALEC climate change denial rhetoric.

Tom Fanning responded comparing a stock portfolio to SO’s energy portfolio,
“some stocks like Southern that have low beta, low risk” balanced with
“some crazy stuff” with high beta.
Well, that’s been my point for five years now:
Kemper Coal and the Vogtle nukes are crazy stuff, and too much of it.
He did point out nuclear is the highest capital cost (capex)
but said it was cheap to run, as in low operational cost (opex),
citing $1/million BTU.
He said Kemper coal was similar.
He disparaged renewables for being intermittent.
This is exactly where Southern Company could be most useful by
solving that problem with batteries and other storage and a smart grid.
Instead he continued to tout natural gas as the connector in the middle.

Charles Wade from Noonan, Georgia, with about 4,000 shares
said his portfolio was not balanced “I’m heavy in Southern”.
He wanted to know “what you’ve done for me lately. The last five years have been a dead horse.”
He had the Atlanta Journal-Constitution article about Plant Vogtle
being exhibit A for why no company had built any nuclear plants in the
past 30 years, and he wanted to know why Southern Company thought it could do it.

Wade read some comments from the newspaper, including that SO is trying
to re-create an industry with no live knowledge base.
He wondered,
“It sounds like we’re chasing a dead horse.”

Fanning, for once paused, perhaps briefly at a loss for words,
then complained the AJC doesn’t always give a balanced story.
His version was slow permits, schedule delays, and still working out cost to complete.
He claimed the $6.3 billion Westinghouse has written out has almost none accrued to the bills of Georgia Power customers.
He said SO had successfully lobbied for loan guarantees and “all sorts of other”
things.
He said cost increases to Georgia Power customers would be 6.5-8 cents, not 12.
Um, that’s still an increase, when solar power would produce a decrease.
He did
also say this:

I’m an enormous fan of renewables, you all know that.
I said that the first time I got on this stage.
And I mentioned solar.
And now we’re either the biggest, depending on what day, we’re either the biggest
owner or second biggest owner of solar in America.

And now I wasn’t crazy about wind and now we’re
pivoting towards wind.
And it’s gotten to a point where I think it makes sense.
It still has some infirmities relying on long-haul transmission
and things like that.

Joyce Lemon of Birmingham, Alabama, with 155 shares,
said she was proud of those shares, and Fanning agreed.
She commended the leadership council and the board on their efforts
to contain emissions because she wants to pass on a livable planet.
She said she had sent him an article about “the improbable set of circumstances”
SO had to contend with back in 2008 or so when it decided to build
new nukes at Plant Vogtle, including flat demand,
low natural gas prices, and no price on carbon.
The price on carbon is what she wanted to address,
having taught micro-economics, and she said the price of carbon
is too low because it fails to cover the whole cost to society.
She asked him to consider the opportunity to get a carbon price set
with the proceeds of a “market-based, revenue-neutral” price going
back to the people, not the government, as a carbon dividend.

Fanning agreed that low natural gas prices had changed many things.
He cited the 2009-10 timeframe decision to go ahead with Kemper coal.
Note that that is before Fanning became CEO,
something he remarked on explicitly at another time in the meeting.
Plant Vogtle was also decided before his time, which I think
he also mentioned.
He continued saying internally SO does evaluate a carbon price
with a matrix of outcomes to “create a dominant solution”
and said that was an indirect price of carbon on transmission,
generation, and “environmental solutions”.
I don’t think SO’s matrices take into account the exponential
deployment rates of solar and wind power.

I also think a carbon tax is too little too late.
Too little because it doesn’t include methane,
and because it would be gamed by big fossil fuel companies and
utilities to delay getting off of thermal generation (fossil fuels, nuclear, and biomass) and onto renewable sun, wind, and water power.
Too late because we no longer have time for half measures.

And to start with, to congratulate you all on closing coal plants,
like Plant Mitchell.
I look forward to you closing Plant Scherer so it will stop sending
mercury up in the air that comes down in our Alapaha River.

[Some nearby stockholders started clapping.]

Yes, you want to clap? Ok, yay.

OK, so, however.
We don’t want your coal ash.
We don’t want your coal ash in our landfill in Lowndes County, which is
a quarter mile uphill from the Withlacoochee River and in an aquifer recharge zone.

And if I can briefly put on my other hat as Suwannee Riverkeeper…

Fanning: [The video doesn’t show, but Fanning nodded; he does his homework.]

…we don’t want your coal ash in any landfill in the Suwannee River Basin.
I’m speaking not only for our Georgia members but also for the ones in Florida,
we don’t want your coal ash in our landfills or coming down our rivers
to the Suwannee and into the Gulf or into the Floridan Aquifer.

Georgia Power and the rest of you made it
and it seems you can find a way to store it.

And, um, I would like to recommend that you do; this is question number one;
that you do what you did in 2015, which is that after a dozen years of
opposition to changing the Georgia law to facilitate solar financing,
you guys backed the bill and changed it and started selling solar power.

I recommend that in 2017 you pivot that way about coal, and instead of
what you guys did this year of opposing a very mild-mannered set of
coal ash bills that basically would have brought greater transparency,
I recommend in 2017 that you pivot and support
transparency in coal ash and even better bills.

Now, getting slightly more personal here, since you own AGL,
you also own the pipeline that starts on my property and runs to
Moody Air Force Base.

And since you own half of Southern Natural Gas, you own half of the
other pipeline it connects to, which also means you own the step-down station
that is constantly hissing 24 by 7 [hisses].

And I’ve looked through the easement papers my father signed,
and I do not see anywhere where it say that the pipeline company gets
a noise easement for the surrounding 40 acres. [audience chuckles]

So, I have a suggestion.
Another congratulations here: Warner Robins.
Somebody mentioned solar panels at Warner Robins and all those other
military bases: yay!
[claps, joined by a few others]

Please keep doing that.
And in particular, how about at Moody Air Force Base?
You put enough solar panels at Moody; they won’t need that pipeline;
they can shut it down.
Then I won’t hear that hissing.
You can do that!

OK, so I’d also like to congratulate you on all that solar and wind you have deployed and the battery deal with Tesla [which Fanning announced in 2015].
Add to that a smart grid.
As you always point out the only or the biggest private R&D utility operation in the country; add to that your expanded territory:
you have the capability to, well.

You’ve been doing this for at least five years now, I know because I’ve seen you up there for that long.
So probably at this point you’re thinking about your legacy.

Or do you want it to be that you, Tom Fanning, had the energy,
to pivot the Titanic company of Southern Company
away from the nuclear iceberg and lead it:
the company, the southeast, the country, and the world
towards the sun and the wind power?

Thank you.

Yes, I was alluding to Shakespeare’s play Julius Caesar, but let me be clear:
I went straight to what Mark Antony worked around to;
I came not to bury Plant Vogtle but to praise Tom Fanning and SO
and to ask them to do more: to make a legacy that will live on.

I’m not familiar about the hissing station.
I take you at your word.
Here’s Drew Evans.
Talk to him and see what’s going on.

On the ash, you know, I think I made a little news here,
ah, three years ago?
Where I said today we’re going to close all of our ash ponds,
and some of our guys said, “we are?”
And son of a gun!
Particularly here in Georgia, working in concert
with your state EDP we’ve commenced that in a big way.
And we’re doing it in an exceedingly responsible way.
We’re removing all the ash and putting it in a landfill,
a safe landfill lined and everything else,
where you’re near any waterway.
And even where you’re not,
we’re using the highest level of technology.
Closing in place,
but putting in place slurry walls, that do not permit the migration
of anything from the close-in-place dike to anywhere outside our
boundary of our plant.

So we’re using the highest level of technology, working hand in glove with the state of Georgia.

Right, and Georgia Power worked hand in glove with GA-EPD in shooting
down those coal ash bills, too,
so there is room to improvement.
Fanning did not address my request for SO to pivot to support new and better
coal ash bills.

And the state of Georgia in fact is ahead of the federal requirements.
But all of our companies are working on these kinds of issues
across the southeast.
So, um, back in Georgia, we’re ahead of the federal game in that regard.

Last thing, renewables mix.
It’s fascinating.
I’ve talked about this before,
and I wish we could continue to grow solar and everything else the way we have.
You know that in legislation passed last year they are phasing out
some of the tax benefits associated with investment
tax credits associated with solar,
and production tax credit associated with wind.
We have made a commitment to do more wind and to take advantage of
those production tax credits.

Um, I think it will be an interesting period going forward in this
new tax reform package that may or may not get debated
effectively in Congress.
And we see that Tr… president Trump has come out with his own proposal.
What the fate of that is….

You know that this immense growth
that we saw,
remember how we went from two and a half billion in our
capex for renewables became four and a half billion
that’s what led to all these changes that you’ve seen.
Whether we can sustain that or not, I can tell you that our budget
this year is only a billion and a half.

Why did we go from four and a half to a billion and a half?
That’s because the tax credits are eroding;
the market is drying up a little bit.

I think renewables are exceedingly important in the future.
Look at what we’ve done.
I stand behind my word.
We’ll see how it develops.
If it develops well,
we’ll be right there in a leadership role.

So John, thank you so much.
You’re always welcome.

And I thank you, Tom, for your hospitality and your thoughtful answer.
But in previous years you told us all how much influence you and
Southern Company have over federal energy policy.
And SO has more influence than anyone else on the planet over
wind in the Atlantic offshore from Georgia, which SO is not yet doing.
Plus the price of solar and wind power keeps going down, so that
they are already competitive without tax benefits, unlike nuclear,
which you just said in this meeting required a federal loan guarantee
and other subsidies.
As for the “market drying up”,
last year more new U.S. electricity
came from solar power than any other source, as you know.

So instead of waiting to see, I ask you again to secure your own legacy
by leading us into the future of solar and wind power with storage
and a smart grid.

Nancy Everett of Panama City with 5,019 shares
wanted to know what security scenario keeps Fanning awake at night
and what IT countermeasures SO is implementing,
including employing and training the brightest and best.

Fanning, a former CIO, said he could “go on and wax eloquent for hours”
on this subject.
He said he chairs for the U.S. the electricity sector for cybersecurity and physical security,
apparently referring to
“his role as chairman of the Electricity Sub-Sector Coordinating Council, an obscure yet potent group of 30 executives that interacts with federal government intelligence and energy agencies to protect the nation’s power grid from threats and devise responses should an incident occur.”
Rod Kuckro, E&E, 20 June 2014,
Southern Co. CEO relishes role as chairman of industry’s cyber brain trust.

Fanning said NIAC called out “the electricity sector’s stance or preparation”
is the best in the United States.
He said out of a longer list of critical sectors,
“we have simplified that down to three”
finance, electricity, telecom,
and they’ve been coordinating response to any potential cyber incursion.
He used human antibodies as an analogy with internal cyber defenses
if a cyber attack gets past the first levels that try to keep it out.
He said he has “high classified status” with national security,
and two SO board members,
Linda Hudson and Dale Klein, likewise have that kind of security clearance.
All three get classified briefings on “what the bad guys are doing”.

He said he was very proud of harmonizing information sharing and security
for a deep defense, especially since the private sector owns 87% of the
critical infrastructure in this country.
He said much more, praising the three-letter agencies,
about white listing, black listing, and grey areas,
using a trout fishing analogy of looking for swirls near
fishing pools.

Which is all true, although he didn’t say anything about the three-letter
agencies curating zero-day exploits and deliberately infecting every
device they can.
One of the main reasons the Internet is so insecure is those agencies
like it that way.

He praised fusion centers for coordinating local, state, federal, and private
security, and international.
He did not mention that those very same fusion centers have been used
against peaceful unarmed U.S. protestors in Occupy, and water protectors
at Standing Rock, among specific examples that are known.

He said former NYC Mayor Rudy Giuliani, advising the president,
has asked Fanning along with
retired General Keith Alexander formerly simultaneously head of
NSA and U.S. Cyber Command,
to brief the president on security of the electric grid.

Fanning concluded by saying the U.S. electric grid was “well spoken for
and resilient”.

Martha Godfey from LaGrange, Georgia, with 4,200 shares,
said she owned substantial shares in AGL because her father used to work there;
she could not sell them due to the merger deal; so she got cash, and a tax bill.
She wanted to know why she couldn’t transfer stock for stock.

Fanning answered
that it was because SO paid cash and only later did a stock deal,
which turned out to be a good deal since SO’s stock went up on the announcement.

Richard Alexander of Perry, Georgia, with over 100 shares,
first apologized for not understanding the protocol in his first Southern Company meeting, and said how proud he was to be a stockholder.
His two questions were about the plant being closed at Lake Sinclair.

What’s going to happen to the lake now that the plant is closed?

And what about those fishermen running around because they can’t find the plant to go home?

Fanning laughed and said
Paul Bowers, president and CEO of Georgia Power Company,
would hand out compasses, and Bowers would handle the closing issue.
>

Kuczynski said no more funds had been collected in several years
due to the litigation, and they were hopeful that with a new administration
something might happen.
Fanning added there were other potential sites, including in Texas.

Tenny further asked about lawyer’s fees at Plant Vogtle.

Fanning said
it was a big number, he didn’t know how much, but it was money well spent compared to the amounts at stake in capital cost and financing cost 45.7% of $15 billion,
“spending money on good legal help was a smart thing to do”.

Fanning wrapped up
by saying they tried to be good listeners and to move forward for the greater good.

Acknowledgments

As always, I praise Tom Fanning for being a class A CEO and for hosting a
very civil, congenial, and informative stockholder meeting.
Thanks to Ronny Just,
Governmental Relations Manager, Georgia Power,
to Paul Bowers, president and CEO, Georgia Power, and to other SO and Georgia Power executives
who were most hospitable as always.

I thank the communications director who came up to me afterwards,
whose name I unfortunately did not get,
who seems to have implemented my suggestion to enable linking directly
to specific times in the videos.
Plus the meeting video is broken up into four major parts,
which greatly simplifies finding things in it.
Now if we can also have transcripts again….
Also thanks for putting me on the cover of your video:

Thanks to
Andrew W. Evans,
Chairman of the Board, President and Chief Executive Officer,
Southern Company Gas, for clarifying his position on Pivotal LNG,
which is that it’s not for export, it’s for fueling ships,
and Pivotal is building an liquefaction plant in Jacksonville
so as to avoid the need for sending LNG there by truck.
Also he says LNG in trucks won’t explode.
My opinion on that differs, and I will blog more later on that with evidence,
but thanks for the communication.

Also, Drew Evans, or “President Hiss” as I’m told he’s now called,
said he would follow up about the hissing sound. I look forward to that.

As ever thanks to Sierra Club for having people there asking great questions
(including at least one in a previous part of the meeting).
I am a member of Sierra Club, but I was not there to speak for Sierra Club.
I spoke for myself, for Okra Paradise Farms, and from when I pulled out the
bumper sticker also as Suwannee Riverkeeper for WWALS Watershed Coalition.

Southern Company stockholder meetings: more fun than you can have without paying for it!
Oh, wait, I did, when I bought that stock….

-jsq

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